Weekly Update for week ended August 08,2008

Sensex has finally shown some respite to the Investors. For the week 4th Aug 2008 – 8Th Aug 2008 SENSEX ended 3.5% higher i.e 511 points. The rise in Sensex brought some relief to concerns regarding monetary policy tightening. The uniform market sentiment in the past few weeks have been quite negative.Investors expected - Aggressive monetary tightening. - And Growth rate slowing down due to higher inflation. This week thanks to the correction in Commodity Price and Monsoon picking up uplifted their sentiments. Even BSE Mid – Cap and Small cap witnessed some gain- 4% and 3% respectively this week.The largest sectoral gainer was BANKEX , which gained 10 % rise. This bought some good news to banks like ICICI BANK, HDFC BANK and so on. Bankex was followed by gain Auto and Consumer Durables thanks to the decline in crude oil prices.Correction in commodity prices had an effect on Metals and ONGC resulting the prices to dip. FII’s appeared more optimistic during the past week.This fact became apparent as they became net buyers for the week. Maybe the dip in crude oil price helps to lessen concerns on the higher fiscal deficit of the country. The market sentiment picked up after the recent interest rate hikes by the RBI as crude oil and other commodity prices fell, providing some comfort t investors regarding the inflation scenario as well as the high fiscal deficit. Cash liquidity remained tight after theRs10000 Crore Auctions as overnight rates stayed in 9.15-9.25 % bound range.INR has appreciated to the Rs 42/$ mark. The RBI auctioned 8.24%GOI 2018 for Rs 6000 crore and 7.95 % GOI 2032 for Rs4000 Cr at cut –off yield of 9.14% and 9.88% respectively, lower than/in-line with market expectations. THE RBI also announced Rs 3000 Crore auction of treasury bills next week. WPI based inflation rose to 12.01% YOY growth as on July 26,2008 while analysts suggest that inflation is not close to its peak yet and is likely to remain in double digits for sometime to come. Further monetary tightening cannot be ruled out till inflation starts moderating and comes to the 7% level targeted by RBI. The US Fed kept the interest rates unchanged at 2% while stating that :downside risks to growth remain” dropping a reference in June’s statement to “diminished” dangers/ The Fed also said price increases are of” significant concern while also hoping that the recent fall in crude prices will help cool inflation. Analysts reckon that Fed won’t budge until next year and wants to avoid a nearly rate increase that further weakens employment and fuels instability in financial markets. BOE kept interest rates unchanged at 5%, defying calls for a rate cut, as they wrestle with slowing growth and accelerating inflation. While inflation exceededthe3% upper limit(2-3% BoE’s target inflation rate) to print 3.8% in June 11 year high, BOE has indicated that it may exceed the target “until well into next year”. Consumer confidence is low and housing sector continues to deteriorate, as services, manufacturing and construction activity dropped